Should we really call it F&I?

This is probably a lost cause, but the term “F&I” is a misnomer, since most of the time in most states F&I departments rarely sell actual insurance. The exceptions that prove the rule are credit life and disability insurance.

A better term might be “protection policies,” for extended-service contracts, tire-and-wheel policies, and the like, says Gary Fagg, a consulting actuary with CreditRe in Hurst, Texas.

In several states, including Missouri and California, it’s a significant legal issue in fraud cases involving direct marketers: Do the policies they offer qualify as insurance, as product warranties or as extended-service contracts?

State laws also vary about whether to define GAP as insurance. In the few states that do, retail prices are regulated, and dealership employees need an insurance license to sell GAP.

As Fagg joked: “Maybe we should call it the Finance and Everything-but-Insurance Office.”